Budget 2013: wine trade dismay as Chancellor raises tax

UK Chancellor George Osborne has provoked a fierce response from the wine trade after adding another ten pence to the cost of a bottle of wine, while cutting tax on beer.

George Osborne’s decisions are ‘invidious and unfair’: WSTA

Duty tax on wine will again rise by 2% above inflation, from midnight this coming Sunday, Osborne announced in his Budget speech. It means duty tax on a bottle of wine now stands at £2 and has risen by 50% in real terms over the past five years.

The Chancellor’s decision comes amid falling wine sales in the UK, and has angered much of the wine trade, despite many expecting the rise as part of the government’s duty tax escalator.

‘Today was yet another missed opportunity,’ said Bibendum‘s managing director Michael Saunders. ‘What other industry has had to suffer a 50% increase in tax in just five years?

‘What the government should be doing is focusing on educating people about drinking, whilst using the powers at its disposal to create jobs and stimulate growth in the all important hospitality sector.’

Bordeaux winemaker Gavin Quinney, owner of Chateau Bauduc, said the ten pence rise is more than all the duty on wine in France, Germany, Spain, Portugal and Italy combined. ‘It’s so unfair on wine drinkers in the UK.’ he told Decanter.com.

‘We are just tax collectors now,’ he said of producers. ‘We are paying the French government to grow it and make it, and then [in the UK] on a £6 bottle of wine, 50% is tax.’

Dismay within the wine trade was exacerbated by the Chancellor’s shaving one pence per pint off duty tax on beer. He also scrapped the duty tax escalator for beer, preventing automatic above-inflation rises next year.

‘His decision to cut duty on beer but increase it on wine is invidious and unfair,’ said Naked Wines‘ founder and chairman, Rowan Gormley.

‘It makes little sense to single out beer, particularly as there is a [European Union level] legal precedent to suggest government is unable to do so,’ said Miles Beale, chief executive of the Wine & Spirit Trade Association (WSTA).

‘If this was designed as a measure to support pubs it seems misplaced: over 41% of drinks sold in pubs are wine and spirits, contributing £9.4bn per year.’

When questioned on the legal precedent, a WSTA spokesperson said that it is ‘too early’ to say whether the Chancellor might be challenged. In defence of Osborne’s decision, the British Beer & Pub Association cited several examples of European Union member states differentiating between beer and wine in duty regimes.

The European Commission confirmed in a statement, ‘EU rules lay down the minimum rates of excise duties on alcoholic beverages that Member States must respect. Wine, beer and spirits are different products so these are subject to different rates. As long as the UK respects the minimum rates set in the EU Directive on excise duties and does not discriminate against imported products, the UK authorities can set the rate at the level they deem appropriate.’